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How Toyota thrives when the chips are down

(Reuters) – Toyota may have pioneered the just-in-time manufacturing strategy but when it comes to chips, its decision to stockpile what have become key components in cars goes back a decade to the Fukushima disaster.

After the catastrophe severed Toyota’s supply chains on March 11, 2011, the world’s biggest automaker realised the lead-time for semiconductors was way too long to cope with devastating shocks such as natural disasters.

That’s why Toyota came up with a business continuity plan (BCP) that required suppliers to stockpile anywhere from two to six months’ worth of chips for the Japanese carmaker, depending on the time it takes from order to delivery, four sources said.

And that’s why Toyota has so far been largely unscathed by a global shortage of semiconductors following a surge in demand for electrical goods under coronavirus lockdowns that has forced many rival automakers to suspend production, the sources said.

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